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Taxes on real estate keep local government running. Cities, counties and school districts are among the government bodies that use property taxes--also known as ad valorem taxes--as a major part of their revenue. Elected officials set the property tax rates for their districts, but the property value of real estate is calculated by the county assessor's office.

Basis

Property taxes are based on the market value of each property, which is usually defined as the price a knowledgeable, interested buyer and seller would agree on. Assessors, according to the Investopedia website, may use recent sale prices of similar properties to figure out the value; calculate the current cost of buying an identical patch of land and erecting an identical building; or figure the value of a commercial property based on the income it generates.

Considerations

Many states have exemptions or deductions on their property tax which assessors must factor in. In California, for example, assessed values can only rise 2 percent from year to year, plus the value of new construction, according to the state Board of Education. If the property is sold, it's reassessed at current market value, then the 2 percent limit resumes until it's sold again. Two identical homes can have sharply different tax bills depending on when they were purchased.

Geography

Assessors will set the value of every piece of property in the county, but depending on state law, many properties will be exempt or partially exempt from taxation. The California Board of Education states that in California, hospitals, scientific properties, free libraries, burial plots and aerospace museums are completely exempt; a disabled veteran may be able to exempt the first $100,000 of assessed value from property taxes.

Significance

Property taxes are measured in mills, the Investopedia website states. Each mill represents $1 of tax on $1,000 of assessed value. A $250,000 house taxed at 6 mills, for example, would result in an annual property tax bill of $1,500.

Prevention/Solution

If the millage rate is too high, voters may be able to convince their city council or board of education to lower it. Elected officials have no say over property assessments--assessments are supposed to be based strictly on facts--but owners can appeal their assessment if they think the assessor overvalued the property. The deadlines and procedures for filing an appeal can be found at the local tax assessor's office.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

Photo Credits

A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com